Dell Computer Corporation and the Computer Industry

Dell Computer Corporation Andreas Bierbrauer

Dell Computer Corporation and the Computer

Industry

Library Project: Industry Analysis

Research Method in MIS (ISQA 8060)

Instructor: Dr. Deepak Khazanchi

Andreas Bierbrauer1

October 10, 2000

1 This sample paper is made available with the permission of the author.

Dell Computer Corporation Andreas Bierbrauer

Dell Computer Corporation

Industry composition

Dell Computer Corporation is the world's largest direct computer systems company, with

revenues of $25.3 billion for the fiscal year ended January 28, 2000. Michael Dell founded the

Company in 1984 on a simple concept: By selling computer systems directly to customers, the

Company could most efficiently understand and satisfy the computing needs of customers. Dell

is in the Computer Hardware Industry of the Technology Sector.

The major peer group that Dell competes with includes Apple Computer, Compaq, Gateway,

Hewlett-Packard, IBM, Sun, Silicon Graphics, NCR and Micron Electronics. (Multex.com, 2000)

Dell is No. 2 worldwide in market-share and consistently the leader in liquidity, profitability and

growth among all major computer systems companies, with approximately 37,000 employees

around the globe. The company ranks No. 1 in the United States, where it is a leading supplier of

PCs to business customers, government agencies, educational institutions and consumers. (Dell,

2000, [On-line]) 803 companies are classified as Electronic computer manufacturers, with value

shipments (VS) of 38,205.9 (million) dollars. The concentration ratio (Herfindahl Index), or % of VS

Value Accounted for by 4-largest companies is 45% (U.S. Bureau of Census, 2000). The

concentration ratio is intended to measure the degree to which the industry is dominated by large

firms (Baumol and Blinder, 1994, p. 484); 45% indicates a high concentration factor, evident in

the computer industry's consolidation into five main players.

Geographic dispersion

Dell's corporate headquarters are in Round Rock, Texas, near Austin, the company's birthplace.

Round Rock is also the home to Dell Americas, the regional business unit for the United States,

Canada and Latin America. Dell also has regional headquarters in Bracknell, England, for

Europe, the Middle East and Africa; in Hong Kong, to serve Asia-Pacific; and in Kawasaki, Japan,

for the Japanese market. The company manufactures its computer systems in each of six

locations: Austin, Texas; Nashville, Tenn.; Eldorado do Sul, Brazil (Americas); Limerick, Ireland

Dell Computer Corporation Andreas Bierbrauer

(Europe, Middle East and Africa); Penang, Malaysia (Asia-Pacific and Japan) and Xiamen, China

(China). Dell maintains sales offices in 34 countries around the world, and sells its products and

services worldwide.

Industry Growth – past, present and future

The computer industry has rapidly become one of the largest in the world. While annual

worldwide unit sales of PCs are growing in the mid- to high-teen percentages, revenue growth

has stagnated. IBM still sells PCs--at a loss--to businesses, but it has dropped out of the U.S.

retail PC business. Compaq is struggling to hold its lead as the global leader in PC sales and has

not become a top player in the systems-integration business despite its 1998 purchase of Digital